Apex court asks DoT to examine payment plan and guarantees of Bharti and Vodafone Idea.
The non-telecom PSUs got a big relief on Thursday with the department of telecommunications (DoT) informing the Supreme Court that it has withdrawn 96% of the dues claimed against such firms as adjusted gross revenue (AGR) dues because their core operation was not telecom services. The DoT had raised demands of around Rs 4 lakh crore on a clutch of PSUs like Gail India, PowerGrid, DMRC, etc, because they hold some form of telecom licence with spectrum.
During the previous hearing on June 11, the court had expressed its anger at DoT for issuing demand notices to the PSUs stating that it was a gross misuse of its ruling in the AGR matter.
However, for telecom operators like Bharti Airtel and Vodafone Idea, no relief came as the apex court asked them to first pay upfront a reasonable amount of dues, backed by securities and guarantees, before it could consider their plea for a staggered payment spread over 20 years. It also asked the telcos to file audited balance sheets of the past 10 years and asked the DoT to examine their payment plan, securities, and guarantees.
The court has fixed the next hearing in the third week of July.
The plea of Bharti and Vodafone Idea is that they be given a 20-year period to clear their dues in a staggered manner. On additional guarantees sought by the court, like bank guarantees or personal guarantees by the directors, both the companies said that the DoT already has their bank guarantees against licence and spectrum. Bharti Airtel, for instance, said that DoT has their bank guarantee worth Rs 10,800 crore, which can be encashed if it defaults on payment. The company has spectrum worth Rs 1.12 lakh crore, licences and bank guarantees which are far in excess of the demands made.
Of its nearly Rs 43,000 crore dues as computed by DoT, Bharti has paid nearly Rs 18,000 crore. It said that its payment constitutes 70% of the total amount collected by DoT so far.
Though these guarantees are for spectrum bought in auctions for which deferred payments are made, implicit in the company’s argument is that it won’t risk losing higher amounts in the form of guarantees as well as what it has paid so far to default on its remaining dues of around Rs 25,000 crore.
Mukul Rohatgi, counsel for Vodafone Idea, said that the company is not in a position to give any fresh bank guarantees. He said that the parent company has written off investments in the firm. Rohatgi said that the company has assets worth Rs 42,000 crore, which have been charged as securities to secure borrowing of over Rs 1 lakh crore.
Vodafone Idea also said that its over Rs 10,000 crore of bank guarantees are lying with the DoT, which should be considered as security. “The ship is barely afloat, the only way to pay AGR dues is to stagger payments over 20 years. The company has to earn and pay, and that is the only way,” Rohatgi said, adding, “Dues claimed are over Rs 50,000 crore, how can I ask independent directors to furnish personal guarantees?”
To this, the SC said that all the assets of the company are charged, and it is a foreign company, so what happens if it walks away, leaving the assets here? Stating that there has to be provision for down payment to avail of staggered payments, the court observed that there’s a need to show bonafide to claim benefits of staggered payment.
“The company must work something out to come with some offer. A reasonable amount needs to be paid upfront. It is not possible for us to pass orders without reasonable upfront payment,” the court observed.
Rohatgi said he appreciates the suggestion from the court, and requests the court to allow two weeks to confer with the management of the company and get back.
Vodafone Idea’s dues are around Rs 58,000 crore of which it has so far paid only around Rs 7,000 crore.